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Petitioner also attempted to analyze the value of the
recyclers because he initially felt that the $1.5 million cost
per recycler did not make sense. However, he found it difficult
to determine the value of the actual recyclers. After looking at
the design of the equipment and the process as a whole, however,
petitioner believed that the cost of $1.5 million per recycler
was reasonable. Petitioner also believed that the relationship
between the annual rental cost and the value of the recyclers
contained in the POM was reasonable because the relationship
resembled that in his bus investment. Petitioner did not visit
PI or observe a recycler in action before investing in Madison.15
In making his calculations, petitioner testified that he did
not rely solely on the figures in the POM. Petitioner took what
he believed to be a more conservative discount for the “virgin
material” and used more conservative estimates for the price of
polystyrene and the projected return on the investment.
Petitioner believed there was a direct relationship between the
price of oil and the price of polystyrene and its components, and
he consulted various sources regarding the price of crude oil,
polystyrene, and related products. Additionally, petitioner
contacted Madison’s general partner, Mr. Roberts, about the
partnership. Petitioner asked Mr. Roberts about the investment
15Petitioner did ask for a recycler manual. The record does
not disclose, however, whether petitioner ever received or
reviewed such a manual.
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